The Weekend Edition is pulled from the daily Stansberry Digest.
China's economy grew so fast, a lot of people missed what was happening...
The spectacular growth happened that quick. Let me explain...
You see, for a good stretch of the first decade of this century, China's economy was growing an average of 10% a year, and often faster...
Yet despite this, it never really dawned on many outsiders just how big of an impact this was having on China's people... and what that meant for investors.
I don't blame anyone for this. It's hard to "see" half a billion people being lifted out of abject poverty into the ranks of the middle class, especially when it's happening halfway around the world.
Social advancement on that scale – and speed – shocks the rest of the world into thinking, "Hey, weren't they always this rich?"
They weren't. And China's not alone in proving this story out...
A long time ago, the U.S. saw similar periods of growth that led to massive riches...
The thing is, you have to go back about 100 years to find them.
Think back to the Second Industrial Revolution, around the time Henry Ford's cars were just beginning to be mass produced... or to the years immediately after the Great Depression...
An economy that grows an average of 10% for a decade isn't just an achievement for any country. It's a modern-day miracle. And that kind of growth creates a whole new generation of wealthy entrepreneurs and a bigger middle class, who end up spending more, and growing the economy even more.
You likely have an opinion about China today...
But for better or worse, China's newfound wealth changed the world in ways we previously thought unimaginable...
It still surprises me that a lot of people still have a hard time figuring out what has driven China to become so successful...
But the answer couldn't be simpler: It's the middle class...
In the same way a booming middle class did wonders for the U.S., China's middle class turned the country into the world's largest consumer of just about everything you can think of.
Take what we see in tourism, for example...
For decades, American travelers were the most prolific and highest-spending tourists trotting the globe. But today, Chinese tourists have effectively grabbed the throne.
Take a trip down the luxurious shopping center of Champs-Élysées in Paris and you'll see Chinese folks forming lines outside Louis-Vuitton, Hermès, and Chanel. It's like they're on a mission to spend their money.
Before COVID-19 struck, Chinese tourists were spending more than $100 billion a year on travel-related expenses in the U.S. alone. Globally, they splash around three times that amount.
They've also become one of the world's largest investors in overseas real estate. And they've developed a taste for pricey locations, including New York, San Francisco, and Sydney, Australia.
If you were to ask people living in these cities what's driven up the value of real estate in their hometowns, the answer will likely be the Chinese buyers.
The "Next Chinas" are right next to China...
A wise gold investor and dear friend once told me, "If you want to find gold, look in properties located next to where lots of gold have already been discovered."
When it comes to growth and opportunity, China has been the mother lode.
But it hasn't been so easy to see...
A thriving economy typically goes hand-in-hand with a thriving stock market. At least that's how it's supposed to work...
But for 19 of the last 20 years, China's stock market has been bouncing around like a yo-yo. And despite growing by more than 10% a year in the first 10 years of this period, the average annual gain in the Shanghai Composite Index was barely half that.
By all measures, it was a failure... but not if you looked beyond the headline index like I did.
While the Shanghai Composite Index only managed to more than double in the first 20 years of this century, there were huge individual winners...
A company called NetEase (NTES) gained nearly 15,000%... And another company called Tencent (TCEHY) did nearly three times better, growing 44,300% in only 16 years...
Then, you have latecomers like Alibaba (BABA) and JD.com (JD) – China's two largest e-commerce businesses that have delivered huge gains for investors even during the pandemic.
Their shares are up roughly 30% and 110%, respectively, since the beginning of the year.
But while there's still a lot of "gold" to be found in China, the easy discoveries have already been made...
China's explosive growth was powered by its growing middle class. By 2022, more than 250 million urban households are expected to have joined China's middle class, which is up about 100 million from 2012.
The country continues to add 24 million city-dwellers to its middle class each year. But it's simply not having the same economic impact as it did 20 years ago. The base is now too big.
What this means is that you'll need to do plenty of digging from here on out to find more companies like Tencent and NetEase in China.
Meanwhile, the Next Chinas are just at the beginning of that steep upward curve in the middle-class boom.
The rest of Asia's emerging markets had a front-row seat to China's economic miracle. And they don't want to be left behind.
I'm talking about countries like Indonesia, Malaysia, the Philippines, and India...
For the last 10 years, these markets have been growing 5% to 7% a year, almost nonstop. That puts the region – with a market of nearly 2 billion people – about where China was at during the start of the century.
And now, the middle class in this part of the world is growing faster than anywhere else... even China.
And this trend is setting the stage for a monstrous surge in economic growth – the likes of which transformed China from a backwater agricultural state into the world's second-largest economy.
These markets are fertile ground to find the next 10,000% winners...
What I'm talking about right now is a part of the world where 85 million people are joining the middle class every single year.
That is potentially demand for tens of millions of new houses and condominiums... cars and SUVs... refrigerators and washing machines... computers and flat-screen TVs. The list goes on. And, that's on top of the existing demand.
When you're faced with this intense level of wealth creation, it's fertile ground to give birth to future Amazons, Apples, Tencents, Alibabas, and NetEases.
In other words, if you want to find the next 10,000% winners of the coming few decades – or if you just want to double your money fast – China's neighbors are a good place to start looking.
China wasn't as accessible back then as the Next Chinas are today. And that's to your advantage.
And it could be as lucrative as China was for investors diversifying away from the U.S. in the early 2000s.
Ask yourself this... Would you rather buy U.S. stocks at 30 times earnings, or the Next Chinas at half that valuation? I know my answer.
It's easier than it sounds...
When I started out in this business 21 years ago, "China" was already becoming the buzzword in the international investment community.
The country had opened up its real estate market, creating the world's biggest property boom in half of a century.
The Chinese went gaga over renewable energy, like solar and wind, unleashing the biggest solar and wind power installation spree in modern day.
But for the average investor, it was difficult to get in on this growth early on because the companies involved weren't readily accessible in the U.S. market.
That's no longer the case today...
Along with the boom in U.S.-listings of Chinese companies has been a proportional increase in the number of easily tradable emerging-Asian companies.
Moreover, they're not constantly overshadowed and weighed down by threats of delisting or forced divestment, as U.S.-China tensions, including the "trade war," keep rising.
In fact, the Next Chinas like Indonesia, Malaysia, the Philippines, and India are perfectly positioned to become new manufacturing bases for companies looking to leave China (and the U.S. tariffs associated with doing business there).
That means investors today have an opportunity to claim an early stake in the Next Chinas of the 21st century. And the beauty of it all is that there is already a roadmap for finding them.
This is an unstoppable opportunity... one that could stack up potential quadruple-digit gains in the next three to five years, like the kind I saw from my front-row seat next to China.
Good investing,
Brian Tycangco
Editor's note: Emerging markets are experiencing a major growth wave... presenting investors with an opportunity that has been off-limits to most folks for years. These "Next Chinas" are mimicking the rise of China – without the politics, and with all the extraordinary upside. And now, it's the perfect time to get in... Click here to learn more.
